Copyright

Volume 23 For Publication Date: September 19, 2003 No. 19

Health Care Bill Adds Cost for Schools

As the Legislature was grinding to a close last week, one of the final bills passed was SB 2 (Burton, D-San Francisco), which provides sweeping changes in employers' responsibility for providing health care for most employees. While most people support increased access to healthcare, the ability of a State Legislature to take credit for the reform while handing nearly the entire bill to employers has been, and continues to be, hotly debated.

School employers generally offer some of the best health benefits around; however, they are still likely to be affected. But before we jump into school issues, we need to recap what the bill really does. For those who already are familiar with that, you may want to jump to the end of the article and read only about the potential impact on schools.

What is the Concept?

So how would this plan work if the bill is signed by the Governor? Each employer would be assessed a fee large enough to cover the cost of health care for each employee and his/her dependents. If an employer elects to offer health care directly, that employer would receive a credit that would reduce the cost of its fee. Alternatively, an employer could avoid paying the fee by demonstrating satisfactory evidence of insurance and being granted a fee waiver.

How is the Program Funded?

The State Health Purchasing Program would be funded through a continuous appropriation that would allow expenditure of employer and employee contributions. The program would negotiate costs with insurers and accept applications for enrollment from heretofore uninsured employees. Employees would contribute a maximum of 20% of the fee to the plan, and low income earners-those earning less than 200% of the federal poverty level-would contribute as little as 5% of their wages to the plan.

Who Administers the Plan?

All of this would be administered through yet another state program, the State Health Purchasing Program, to be managed by the Managed Risk Medical Insurance Board (MRMIB). The MRMIB would be authorized to set and collect fees from employers and also would be given emergency regulatory authority. The fee assessed against employers would be increased to cover the cost of administration, which the MRMIB has initially estimated to be $4.8 million.

Which Employees Are Covered?

Any employee who works at least 100 hours a month and has been employed by a single employer for three months is covered. Dependents of that employee, including a spouse, domestic partner, or children, are also covered and the employer fee will be sufficient to cover those dependents. Employees covered by collective bargaining agreements are exempt from the bill.

Employers are prohibited from reducing hours or classifying employees as independent contractors to avoid this bill. Employers who attempt to do so will face penalties of 200% of the original fee.

When Would the New Law Take Effect?

The program will be implemented in phases. Large employers, defined as those with 200 or more employees, would start paying the fee effective January 1, 2006 ; medium sized employers, under 200 employees, would begin to pay January 1, 2007 . There would be a special exception for employers with 20 to 49 employees, in that the fee would not go into effect unless a tax credit in the amount of 20% of the fee is enacted by the state. Small employers with 19 or fewer employees are exempt from the bill.

So How Are Schools Affected?

Most school districts employ long-term substitutes and temporary employees. In many cases these employees are not part of the bargaining unit and do not receive benefits. This bill would require school agencies to provide health benefits for employees and their dependents who do not now receive benefits, provided that the employee meets both the 100-hour-per-month and three-months-of-employment tests. For the purpose of these tests, we believe a part-time employee with more than one assignment would be able to count the aggregate hours toward the 100-hour minimum. We also think long-term substitutes and temporary jobs that exceed three months would be covered.

The bill states that it does not create a state mandated cost. We think it does create a mandate. But that determination will be made through the normal test-claim process. But is a mandate still a mandate if it isn't funded? That falls into the same category as the noise a tree makes when there is no one in the woods to hear it fall.

What we know for sure is that the passage of SB 2, even if it is signed by the Governor, will not conclude the discussion on employer-provided health benefits. Expect more discussion and possibly more legislation on this subject long before the January 1, 2006 , implementation date.

-Ron Bennett